The view from Thailand: Niche and beating Warren - Thai focus works for Quest's Doug Barnett

Doug Barnett, president of Quest Management Inc, is having another great year. He has just won another award, the World Finance, Best Asia Pacific Long/Short Equity Fund over 2012 award for his Thai Focused Equity and his Thai fund is up 35% so far in 2012.

Barnett has enjoyed 22, nearly 23, years of investing in Thailand and achieved returns that have put him ahead of Warren Buffett's Berkshire Hathaway. Over the last 22 years, Quest has achieved IRR of 16.7% against Buffett's 14.7%, while over 14.7 years, Quest gained 15% against Buffett's 7.3%.

However, Barnett knows his place. His $200m fund is, as he says in an interview with Asia Pacific Intelligence, big for Thailand where the Thai market cap is $200bn (the size of a good sized US company) but small globally. His slogan is: "If you have $1 billion to invest, you have to go with Warren. If you have $100,000 to $20 million to invest, you should invest in the Thai Focused Equity Fund".

Interviewed on Opalesque TV in May 2011, at the time Barnett was celebrating achieving a 3111% gain in value and billing himself as the hedge fund for other hedge fund managers among who have included Julian Robertson and George Soros. "The fund is only available outside of Thailand because of local marketing rules. "It is mostly high net worth individuals and the personal accounts of other hedge fund managers" he says with 35-40 out of his 110 investors representing hedge fund managers.

Research is fundamental. "We visit a lot of companies and read a lot of stuff on Bloomberg, we research and screen historical numbers and I have been here a long time so I have probably visited every Thai company big enough to invest in" he says.

This is fundamental bottom up investing in a niche market. "There's a limit to what you can do in Thailand with our strategy" Barnett says. "Liquidity limits hit at $200-300m so it is a very focussed fund in which we make large bets on things we think are good."

For diversification across his business, Barnett is launching two new funds, one pan Asia excluding Japan which has $6m of the manager's own capital under management. "Pan Asia is a long/short fund just like the Thai fund but most of the positive returns come from the longs and the volatility dampening comes from the shorts" Barnett explains.

The manager of the new fund is Sergej Belozorov, who had six years of experience investing pan Asia and has worked with Barnett on the Thai fund. The Pan Asia fund launch was reported on in Opalesque. This new fund aims to beat the MSCI Asia ex-Japan index by 10%.

"We are experimenting with a new strategy since the beginning of this year" Barnett says. "Using mechanical stop losses for when we hit stocks that go against us." The second new fund is Asia including Japan and this fund, seeded with $4m of in-house money is up 12-14% year to date, beating the MSCI Asia including Japan index by 6-7%.

In the Asian funds all the stocks we are investing in have huge liquidity and market caps - we are trying to do something scalable and the stocks that we invest in trade $10-20m dollars a day. We could easily go up to $500m."

This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.